REAL ESTATE DEVELOPMENT PROJECT
Dallas, Texas | Ameni Kabboudi
Dear Professor Troen On behalf of The Cedars Complex, I present you the development report of the project development in Dallas, Texas for May 8, 2015. The report has been prepared in accordance to New York University Code of Ethical Conduct, in accordance with NYU Schack Institute Resources. The report provides a detailed description of the feasibility of The Cedars Complex development project. In accordance with New York University Student Conduct Policy, I certify that I am responsible for the preparation and content of the report in accordance with the development process class. Yours Sincerely
Ameni Kabboudi Ms. Candidate Real Estate Development: Global Track May 8, 2015
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Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu
Contents EXECUTIVE SUMMARY
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1 INTRODUCTION ....................................................................................................................................................7 2 SITE ANALYSIS.......................................................................................................................................................8 2.1 2.2
PHYSICAL ATTRIBUTES EXISTING CONDITIONS
8 9
3 ZONING AND LAND USE.................................................................................................................................10 3.1 3.1.1 3.1.2 3.2
LOCATION 12 NEIGHBORHOOD ............................................................................................................................................... 14 COMMUNITY....................................................................................................................................................... 15 EVALUATION 16
4 MARKET ANALYSIS..........................................................................................................................................16 4.1 4.2 4.2.1 4.2.2 4.2.3 4.3 4.4
ECO D EMO 16 DEMAND AND SUPPLY 17 OFFICE ................................................................................................................................................................ 18 RETAIL ................................................................................................................................................................ 18 RESIDENTIAL ..................................................................................................................................................... 18 TARGET MARKET 19 MARKET TRENDS 19
5 CONCEPT PLAN/DEVELOPMENT PROGRAM.....................................................................................19 5.1 DESIGN 5.2.1 PROJECT CONCEPT 5.2 SIZE 5.3 FEATURES
20 21 21 22
6 COMPARABLE PROJECTS/COMPETITIVE SET ..................................................................................22 6.1 6.2
PROJECT SUMMARIES REASONS FOR INCLUSION IN COMPETITIVE SET
23 24
7 SWOT ANALYSIS ................................................................................................................................................24 7.1 7.2 7.3 7.4
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
24 24 24 25
8 FINANCIAL ANALYSIS .....................................................................................................................................25 8.1 8.2 8.2.1 8.2.2 8.2.3 8.2.4 8.3
EXECUTIVE SUMMARY OF FINANCIALS 25 ASSUMPTIONS 26 MARKET.............................................................................................................................................................. 26 OPERATING ........................................................................................................................................................ 26 P HYSICAL............................................................................................................................................................ 26 FINANCIAL .......................................................................................................................................................... 27 DEVELOPMENT COSTS 27
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8.4
PROJECTION OF FINANCE
27
9 RECOMMENDATIONS AND CONCLUSIONS..........................................................................................27 10 REFERENCE LIST.............................................................................................................................................29 11 APPENDICES......................................................................................................................................................31
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Ameni Kabboudi: ak5277@nyu.edu
List of Figures and Tables
FIGURES FIGURE 1: SITE DETAILS MAP FIGURE 2: LOCATION OF P ROPERTY IN PROPORTION TO DALLAS CBD FIGURE 3: P ARCEL DETAILED DIM ENSION FIGURE 4: EXISTING CONDITION OF THE SITE FIGURE 5: PARCEL ZONING FIGURE 6: ROUTES FROM THE CEDARS COMPLEX TO DOWNTOWN BY BUS FIGURE 7: ROUTES FROM THE CEDARS COMPLEX TO DOWNTOWN BY TRAM FIGURE 8: ROUTES FROM THE CEDARS COMPLEX TO DOWNTOWN BY CAR FIGURE 9: MARKET ANALYSIS OF 1-2 M ILES RADIUS FROM 1401 BROWDER STREET FIGURE 10: MARKET ANALYSIS OF DALLAS, TX FIGURE 11: SAM PLE OF ONE BEDROOM APARTMENT AND TWO BEDROOM FIGURE 12: COM PETITOR 1 FIGURE 13: COM PETITOR 2
TABLES TABLE 1: SCHOOLS AROUND 1401 BROWDER ST , DALLAS, TX 75215 TABLE 2: WALK SCORE FOR 1401 BROWDER ST , DALLA S, TX 75215 TABLE 3: DALLAS ORDINANCE FOR GREEN BUILDING MINIM UM REQUIREMENTS TABLE 4: ASSESSM ENT OF LAND
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Executive Summary This report was commissioned by The Cedars Complex (‘the project/the development’) to develop an official projection to investors that will form the basis of the development’s future strategic decision making. Subsequent to the refined market analysis, this report proceeds to analyze the project’s value proposition, perform a market analysis and analyse existing possibilities for the project, from which a number of recommendations have been drawn. The research mostly relies on primary data which includes latest industry reports of 3 international real estate firms, online real estate database such as REIS and STDB and government and county official reports. These data are supplemented by secondary research, which especially takes prominence in the target market analysis and findings. From the data and the inspection, the project’s strengths and weaknesses were observed while the market research informing of the project’s opportunities and threats, which were collectively canvassed in the SWOT analysis. Similarly, the project’s distinct attributes, value-enhancements and suitable market were canvassed during the aforementioned process of data collection in order to inform the proposed project. The project’s forecast financing is subsequently accorded greater strategic direction with a market analysis investigating both internal and external factors relating to The Cedars Complex. An analysis was undertaken, and determined the existence of a medium level of competition in the real estate industry in Dallas, Texas. Local demographics were analysed using a range of primary research, especially STBD census data, recommending that the project’s prime market within its area are young professional; businesspeople who commute to Dallas CBD. A competitive analysis was undertaken to determine the project’s key strengths and weaknesses in comparison to competitors. The project’s expected return on investment is explained in the attached excel work. A detailed construction budget withdrawn from the primary database RSMEANS and from the secondary research database Estimate Quote is also evaluated, providing further insight into the necessary strategic direction for the project development. In response to the report’s findings, it is recommended that: Recommendations Opportunities/Threats/Problems Addressed 1. Location Lack of big market absorption 2. Financing the project A mortgage of 8% and LTV of 75% is advised 3. Aim green building Lack of green buildings will make The Cedars Complex stand out 4. Take the land as an advantage for Significant future development will take a great position in the place in the neighbourhood, in addition to neighbourhood increase of population and salary. 5. Establish different units Vacancy rates and absorption rates are good and the market of Dallas is emerging 6. Forge partnerships with local real Attracting new/first renting tenants buyers estate agencies in Cedar Neighbourhood as members
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Ameni Kabboudi: ak5277@nyu.edu 7. Offer financial incentives to Most competitors buildings offer Reduced tenants who successfully refer new rental fees or a visa card The recommendations aim to give The Cedars Complex organisational clarity in its purpose and resolve; a vision for what it should strive towards as a 21 st century real estate market; improvements to the land, and; a strategic-orientation to its financial and physical plan with minimised resources. There is a confident that these findings and recommendations will form the basis for the Investors Committee’s future development of strategy in investment in Dallas outside of the provision of this report. That is why as findings and analysis show, the project is a good investment with an IRR that can reach about 25.26% in a base case. Nothing that the Dallas market is an emerging market and there is all indication that the market is on fire and investment there can never be wrong as the population, and employment and income of household are increasing. To sum up, the project is definitely a good investment and there is a high rate of profitability that investors can get if they invest in The Cedars Complex since there is little risk and medium competition of rental market in the area. In fact with Dallas being ranked first in the U.S chamber of commerce for climate index of 2014 and in the top 5 media markets in the U.S, there is a bright future and huge potential of large development on a national level.
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1
Introduction
The real estate development project initiated on this report consist of a parcel of land that has a 1.64 Acres and is about 1.4 larger than the average lot size around the area. This parcel is located close to Dallas CBD and it has a very distinctive features since the neighbourhood is still not as developed as the CBD area and there is a potential of growth in the area. To be more specific and to achieve more accurate details 1 and 2 rings radius were chosen in order to withdraw precise data as shown in figure 1 from STDB Database.
Figure 1: Site Detailed Map Further research is conducted around the land where, a feasibility analysis is considered in order to develop the vacant parcel of land into a mixed-use project.
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Dallas: Real Estate Development Project
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Ameni Kabboudi: ak5277@nyu.edu
Figure 2: Location of the property in proportion to Dallas CBD
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Site Analysis
This site was chosen because it is one of the few lands left around Dallas CBD and it is the closest and the most appealing land around Dallas CBD. This site is located on the broader district known as the southeast of Dallas. According to the city of Dallas zoning website, 1401 Browder Street falls under PD 317 subtract 2 of mixed use corridors. It is also located in the extreme north part of Cedar neighbourhood which is located under two suburbs; Farmer Market on the right and Lamar Southside on the left, both are located on the southern part of the CBD Area.
2.1 Physical Attributes 1401 Browder Street, Dallas, TX 75215, is stated as a land for commercial use. The lot size is 1.64 acres which makes it 1.4 acres larger than the average lots in the area. The parcel is registered under ID: 00-0001-0986-7000000, with a front footage of 334 and a depth footage of 214 ft. According to zoning, it falls under PD317 which will be discussed further in more details in section 3 about zoning in the report. The terrain of 1401 Browder Street is quite flat with an elevation of 423 ft. The site is almost rectangular (figure 3) and privileged by a 4 corners which allows a full exposure to the surrounding streets as shown on the city of Dallas zoning website. The land is actually surrounded by 4 streets, Browder Street, Belleview Street, Gould Street and Sullivan Drive which makes the project more appealing with an immense view to the skyline of Dallas CBD once it is built. FAR is 2.0 according to the zoning Area. This is important for the developer to know how many stories, the building can rise.
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Browder St
Sullivan Dr
211.92
125.77
Belleview St
333.77
341.6 5
Gould St Figure 3: Parcel Detailed Dimension
2.2 Existing Conditions According to the county public record, the property in subject is part of PD317 section, which is established on land bounded by interstate highway 30 on the north, interstate highway 45 on the east and the railroad right of way on the south and on the west. The land is currently vacant and few zoning regulations are enforced on this area which is considered a good start for the development of the project. On Browder street there is a parking lot while the parcel is surrounded by vacant land and another industrial warehouse in the back of Sullivan Street. In addition, the parcel falls under subtract 2 according to Dallas attorney city records for the article 20317. A moderate density mixed use corridors is established with a purpose of serving Cedar neighborhood in increasing pedestrian and bicycle while preserving the historic value of the area since it is close by the Historic Village.
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Ameni Kabboudi: ak5277@nyu.edu
Figure 4: Existing condition of the site
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Zoning and Land Use
The current zoning provides both challenges and opportunities for the property. As mentioned above, the property in subject falls under PD 317 Zoning code as shown in Dallas County zoning website. The main use permitted under this zoning does not allow agricultural use, however for the commercial use, a limited regulation is set. Only building repair and maintenance shop, catering service, medical or scientific laboratory, technical schools and custom business services and electronics service centres are allowed. This might not be an issue when deciding to develop the parcel since office uses are permit ted under this zoning. As for residential uses, duplex, multifamily and handicapped group dwelling are allowed. For the retail and personal service uses, different aspects are permitted such as auto service centres, bars and lounges, commercial amusement s uch as theatre, bar, lounge, tavern, furniture store and general merchand ise / food store are permitted. These are very important details to see what can be developed on this site. As for yard, lot and space regulations, there is no minimum front yard, no side and rear yard is required. However if rear yard exist it should be no less than 10 feet. No maximum dwelling unit density is set which can foster an easiness of the development of The Cedars Complex. This zoning is focused on the Cedar neighbourhood. One of the most challenging regulations is the height restriction as setting only 90 feet for structure while at least 50%
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of its total flor area restricted to residential uses and 50% or more for its ground area restricted to retail and personal services uses. In addition, there is no maximum number of stories and no minimum lot size which can be a good boost for development of the property since FAR is actually 2.0. From the zoning details, a development of The Cedars Complex does not face a lot of limitations and regulations.
Figure 5: Parcel Zoning
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Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu
3.1 Location Location is detrimental in the Real Estate Business and this project is not an exception. The parcel is located on the border of an upcoming neighborhood, Cedar, which is located south of Dallas Farmers Market district and Civic Center district, which both are located southern Main Street District also known as Dallas CBD arena. The site is 18 minutes far from Dallas downtown by a walking distance. It is only 4 to 5 minutes away driving.(figure 7) The Cedars Complex is very close to Cedar station, which includes Dart Red Line and Blue Line.(figure 6) It is also located near bus routes, #155 Griffin Street, #26 – Akard Street, #2-Ervay. Prospective tenants can rely on public transportation by taking bus 026 blue then 722 and it is only 16 minutes.(figure 5)
Figure 6: Routes from The Cedars Complex to downtown by bus
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Figure 7: Routes from The Cedars Complex to downtown by tram
Figure 8: Routes from The Cedars Complex to downtown by car As the property is classified under multi- family residence-apartments, the property boosts a good amenities as it has nearby schools. The closest grocery stores include different local chains same for restaurants and coffee shops. 1401 Browder Street is actually close to Pioneer Park, Samuel Beaumont Park, Dallas City Hall Plaza and main street and belo gardens which makes it a very attractive spot for potential renters.
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Ameni Kabboudi: ak5277@nyu.edu Dallas Heritage village is 0.7 miles away, about 13 minutes walking distance. The Old city park is less than 0.6 miles within Dallas Heritage Village which is home to the largest and finest collection of 19th century pioneer and Victorian houses. 3.1.1
Neighborhood
The Cedars Complex is located in the historic Cedar neighborhood. The neighborhood is defined according to Dallas downtown website as a ‘home to a range of industries, affordable housing options, living space and creative office space’. Also this neighborhood is witnessing an increase of urban dwellers. This district might has 4 big restaurants, 1 hotel and 2 main big businesses. However, there are minimal bike lanes which affects the walkability score discussed later on the report. The neighborhood is home to 4 public elementary schools where 3 of them are within 1 miles radius from the subject property, 1 middle school and two high schools, 2 school which are located less than 2 miles of the subject property with a low crime rate. Also there is a grocery shop called Del Monte foods company which is 0.5 miles away , 11 minutes walking from the property. In addition the main grocery shops such as smart mart, Cuco’s Produce, Urban Market, Shop N Go Grocery which are 0.8 miles away, about 15 minutes walking distance. Public Schools
Distance in Miles
City park elementary school
0.4
Hospital/Homebound School
0.5
Pegasus Charter High School
0.9
Bill J Priest Institute
0.5
Sau Campus school
2.6
Billy Earl Dade Middle School
1.23
Uplift Education – Uplift Luna Prep School
1.7
James Madison High school
2.5
Table 1: Schools around 1401 Browder St, Dallas, TX 75215 Bars and restaurants are also close to the location of the expected development such as The Cedars Social, Southside Ballroom, Poor David’s pub, Galley’s Dallas, Lee Harvey’s, Emilio’s . A 3.4 and 4 Stars Review are assigned to these places on Google reviews website. There is also a financial service, Resource One Credit Union – not for profit- . In 14
addition, there are two close churches in the neighborhood, Pilot Grove Church and Wayside Missionary Baptist Church. Cross fit Heat Gym and Rock star Fitness Camps and psych gym are close by, however the gym inside the building is considered a good asset. Exxon, a gas station is also located close by the property. 1 hotel , NYLO Dallas South Side 4 stars hotel, urban chic hotel with rooftop pool and bar for an average price of 143 a night is not too far. 3.1.2
Walkability Score for the subject property
According to Walk Score of the subject property, it scores a 77 with being a very walk able place, where most errands can be accomplished on foot. Walk scores analyzes hundreds of walking routes to nearby amenities. Points are awarded based on the distance to amenities in each category. Walk scores are measured based on distance to nearby places and pedestrian friendliness. As mentioned in the previous section, there are many amenities around the site. Walker’s paradise is the highest, a score between 70-89 . The subject property falls under the second category as a very walk able city. For transit score, because of the convenience of the nearby public transportation options as noted above in section 3.1 of the report, 69 was assigned. Last but not least 53 bike score is received due to the minimal infrastructure presented for bike lanes. 100 90 80 70 60 50 40 30 20 10 0
Walkability of 1401 Browder St
Table 2: Walk Score for 1401 Browder St, Dallas, TX 75215 3.1.3
Community
Since Cedar is known as a family-oriented neighborhood. It is considered a small community with only 1,485 people. Residents of this area are characterized as an upper middle class, moderately educated and is highly composed of young professional with age
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Ameni Kabboudi: ak5277@nyu.edu range of 25-35 and mid-career adults of age that ranges between 35 and 44. Only 13.7% of Cedar residents are home owners which makes the project more appealing to be constructed for apartment rentals. As noted before on the location section, the most common way of commuting to the city is driving to work with an estimate of 15 minutes average of commuting length in the rush hours. However, for the market analysis research there is a consideration for the adjacent neighborhoods above Cedar since the subject property is located in the upper side of Cedar which makes it closer to CBD.
3.2 Evaluation According to Dallas Public Records, the site selected is sold twice in the last decade. As research suggest for appraisal in 2014. The assessed total value of the land is $ 465,630 which makes. Tax amount for 2014 is estimated to reach 2.89 combining the state and the city taxes.
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Market Analysis
In order to come up with accurate results, A focus on a small radius of 2 miles far from out subject property is used. This was decided as mentioned above since the located property is bordering other neighborhood and a better understanding of the market needs a larger focus. Also, the Cedar neighborhood data is not enough due to the small market niche in that area. That’s is why an inclusion of Dallas CBD data was included (figure 8)
Figure 9: Market Analysis of 1-2 miles radius from 1401 Browder Street
4.1 Eco Demo Reports withdrawn from STDB of community profile as well as the financial market and demographic is withdrawn within 1 to 2 miles radius. There is a need to explore the demographic data in order to examine the market trends and potential developments in the area. According to recent data of 214, the overall population is estimated at 9,241 within 16
one mile and 50,159 within two miles radius. The average family size is 2.54. Renters make the biggest population of a 76.7% of the total housing units, vacant housing units are about 14.7% of the total 6,098 housing units for 2014. A median household income is only $ 66,920. The median home value however is $297,500 with only 8.2% of the population has a home of value under $100,000. (Appendix 2) For the next 3 years, growth of median household income is estimated to reach % 4.23 which is the highest growth of all ratio which makes double the ratio of population increase and owner occupied housing. These data is a great witness of the healthy potential of the real estate development in the area. For the consequent data of supply and demand, there is a focus on the rental side and not sale of the different real estate sectors.
4.2 Demand and Supply In order to gain a deeper understanding and thought about the real estate market and feasibility of the development project, the market interactions between the supply and demand for different sectors of the real estate industry is taken into account. Three sectors are examined such as the commercial, residential and retail, are considered the most important type of development in this market. Below is a summary of the market condition that only applies to rental.
Office
Retail
Residential
• • • • •
Highest in a decade ! Vacancy 18.3% AVG Asking Price $27.00 sq.ft 6 Million sq.ft under Construction + Demand for class A & B
• • • •
Best performing year in a decade ! Vacancy 7.6% AVG Price $13.81 sq.ft 3.9 million sq.ft under construction
• + Demand for class B & C , shortage
of class A
• One of the top apartment market performer in the country ! • Vacancy 5.3% • AVG Asking Price per unit $ 919 • 15,575 units are under construction • + Demand for Class A; New product, high-end luxury buildings
Figure 10 : Market Analysis of Dallas, TX
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Ameni Kabboudi: ak5277@nyu.edu 4.2.1
Office
According to CBRE recent report, the first quarter of 2015 for Dallas CBD office deliveries is the highest in a decade, where more than 1.5 million sq.ft are in demand. Vacancy rates keep dropping to reach 18.3%. Although employment is growing at a pace of 4.3%, the average asking price is still flat compared to last year with $ 27.00 per sq.fr were delivered construction is reaching its highest at a 52.2% of pre-leasing which points out to the high demand which is considered strong among certain submarkets. Class A and B are keeping increasing with an increase of 3.2% in the last 12-months. 4.2.2
Retail
The retail sector in Dallas, is reaching best performing year in a decade according to last quarter of 2014. The overall vacancy is only 7.6% with very positive net absorption rates which is the highest recorded. What is even impressive is that the retail occupancy reaches 92.2% which is considered a very high number when looking at the market drop of retail sector overall around the globe. Class A building is described as almost extinct in Dallas due the high demand and shortage of the supply. In addition, Class B and Class C average lease have been decreasing to reach only $ 13.81 per sq.ft in 2014. As for constructing, in 2015, there is a satisfactory delivery of retail projects with 3.9 million sq.ft of new retail space under construction. Overall due to shortage of Class A buildings in Dallas, there is a switching increase to Class B and C. Landlords and tenants are working on different strategies with maximizing space and smaller in-line frontage. However, restaurants remain the only sector which did not change requirement for pad-space. 4.2.3
Residential
The residential sector is not an exception to the real estate boom. Despite low supply and rising price, the market finished good in 2014 and expected to slow down a bit by 2015. Also the trend over housing market is above $ 300,000, which confirms the data found about the demographics. Price keeps increasing but supply has been an issue, all top 30 submarket in Dallas reports a very limited supply of finishes inventory. However, new development activity continue to rise. Appreciation rates has slowed down due to the affordability issues. In fact, one mile-radius from the subject property at 1401 Browder Street, new construction built after 2010 makes a 5,367 unit, where renters who moved in after 2010 makes up to 36% of the total renter occupied market. Most renter occupied housing units are made of units between $ 1000 and $ 1999 a month, asking price which can trigger the average rental in Cedar and question the development of the subject property with a median of $ 968 per month in the neighbourhood area. Occupancy rates are great to reach 94.7% and an effective rent of $919 on average in Dallas. Which is below our neighbourhood asking price. With annual demand of 15,228 units and annual completion of 15,575 unites. This develops a great understanding on the reason why occupancy is high and vacancy is at good amount with quite equilibrium in the demand and supply sides.
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4.3 Target Market As shown above, the main target market is adults of age 33 (median of population) with young adults or new families. The neighbourhood amenities as well as the pricing range emphasize the main target market is upper middle class population, who work in the CBD and need be located in the suburbs.( Appendix 2: Market Profile and Housing Summary)
4.4 Market Trends From the residential market point of view, recent data shows a fall in sale prices where the most recent median for homes in the 75215 zip code is only $ 68,625 with a noticeable decrease from 2013 by almost 3%. Dallas County is $ 192,962 which has a 14% increase from last year (Appendix 2). This is important because there is a need to focus on the market trends. With proximity to downtown, the urban lifestyle if key element to the economic and social sustainability. Reports shows that the population will reach double in just 3 years period. Dallas is a major metropolitan city since it is the ninth largest city which makes it more appealing as a living and working environment. In addition, massive renovations have taken place at Love Field Airport, which is about 30 mms total from the subject property. In fact with Dallas being ranked first in the U.S chamber of commerce for climate index of 2014 and in the top 5 media markets in the U.S, there is a bright future and huge potential of large development on a national level.
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Concept Plan/Development Program
As the market research analysis shows, there is a demand to build the place as a residential building. Since the market supply and demand is in equilibrium and the neighborhood is primarily a residential area. So the plan would be to build a green construction and building with the aim of reaching a silver Leed certificate while using the score card for new construction and design. According to Dallas City hall, 22 green building providers for phase 2 of the green building inspection are specialized in both commercial and residential (mixed-use) type of license. According to US. Green Building Council, Dallas city Texas is qualified as 10 th greenest state. Consequently, Dallas has only one platinum building, 10 gold and 12 certified silver buildings. That is why developing the project with a target to achieve a green building is considered a good step for the development. The fact that only few buildings exist under being certified makes the project ambitious and can be a good standing point from other competitors. To qualify for a green building in Texas as listed on city of Dallas ordinance, a new construction must meet these following requirements:
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Ameni Kabboudi: ak5277@nyu.edu 1. Utilizing drip irrigation emitters for all bedding areas of an approved landscape, plan 2. Installing high-efficiency (low flow) fixtures which meets at least three of the criteria: -
The average flow rate for all lavatory faucets must be less than 2.0 gallons per minute
-
The average flow rate for all shower heads must be less than 2.0 gallons per minute
-
The average flow of rate for all toilets must be less or equal to 1.3 gallons per flush
-
Dishwashers must be an energy star labeled that use 6.0 gallons
-
Clothes washers must be with modified energy factor (MEF) greater or equal to 2.0 Table 3: Dallas Ordinance for Green Building Minimum Requirements
In addition, to be considered a green building, a mandatory measure for new development over 50,000 sq.ft buildings needs to reach a certain minimum points for certified level. For The Cedars Complex , a range between 50 and 59 is needed in order to reach a silver leed, and 20% water use reduction. Details are explained in the checklist for the Leed Certificate (Appendix 1)
5.1 Design In terms of design, the project named The Cedar Complex, is relying on concrete material and equipment that match the neighbourhood specification without going extreme with architecture and without using different materials that conflict with Dallas weather. Since housing demand has been increasing in Dallas and since total demand for rental units reached 20,270 while only 9,150 units are supplied , 45% of total demand for rentals are under construction as April 1st 2015 Data. But to be more specific, about 4,679 are renter occupied housing units (76.72% of housing situation within 1 or 2 miles radius from 1401 Browder Street, Dallas, TX 75215 aka The Cedars Complex and 894 vacancy (14.66%). So, a conclusion is derived to build a 164 units in the building, featuring some nice common area that promotes the community environment within The Cedars Complex. According to research, the estimated demand for new market rental housing in the southern region by rent level and number of bedrooms shows the following, Table for Dallas submarket-including Cedar neighbourhood.(Dallas Irvine Report)
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That is why the design concept will follow the standards of the current neighbourhood and the region of Dallas with providing a great residential building for the main target market. The project is planned to include a 50,000 sq.fr of the retail space on the first floor, a lobby and an outside yard, a garage parking option with biking storage and all stories of have a mix of one, two and three bedrooms, bathrooms apartments.
5.2.1 Project Concept The design for The Cedars Complex is based on two sectors of real estate, mainly a retail space and apartments units on the second to 4th floor. The ground floor will be retail space in addition to a garage parking. The lobby will include a lounge where the duplex will have small kitchen, yards and balconies and a gym and business centre. The number of units and the concept is discussed in section 5.2 of the report. With the land being flat, an arranged plan of the housing units with a private garden, exposure to the yard is expected. The lobby would be the major point of interest where all tenants can share and enjoy. The garage parking will be an addition and an optional choice for tenants to have it or not and that will be on the first floor. General security is taken into consideration that is why the building is equipped with private security system with access with electric cards. In details for technical design (Appendix 4), sustainable items and energy-efficient amenities that maintain the goal for a silver Leed Certificate are included (Appendix 1: Silver Leed).
5.2 Size The Cedars Complex, is a 4 stories building with one retail on the first floor, an underground garage as well as a lobby and community area on the second floor, the above stories will feature one bedroom, there and two bedrooms apartments.
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Ameni Kabboudi: ak5277@nyu.edu The two floor plans below showcase the sample of one bedroom and two bedroom units.
Figure 11: Sample of One Bedroom Apartment and Two Bedroom The building will have 164 units classified as 46 one bedroom / one bathroom with a size of a 702 s.f, 87 Two Bedroom / Two bathrooms 950 s.f and 31 Three Bedroom/Two bathroom 1055 s.f. The ground floor will include a retail space such as a chain grocery shop, garage, bike storage, a gym and the business center as well.
5.3 Features In order to stand out as an innovative project, the building includes modern amenities that match the target market and the future tenants demand by fostering a sense of community within the building through the lounge and the business canter. A small recreation centre, gym, Wi-Fi hotspots, study lounge and grassy interior courtyard in addition to garage parking available with bike storage inside the garage are planned. Onsite management and community assistant staff is also included. For the apartments units, private bathrooms and rooms are the only plan for the units, a full sized kitchen, steel appliances and garbage disposal in each floor as well as stackable full size washer and dryer is implemented. In addition to an individually locking bedroom doors and steel front door with deadbolt locks.All apartments feature 9-foot ceiling GE energy star appliances.
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Comparable Projects/Competitive Set
Research shows that the fair market rents around the area would be as following; for a 1 bedroom’s rental is $728, 2 bedrooms is $ 921. Three apartments are located close by the property. South Side on Lamar : 1000- / 3 bedrooms 2140, Industrial Loft in The Cedars, 1 bed from 850 , 2 beds from 3800, 3 beds from 1750 $ and American Beauty Mill, 1 bedroom from 800$ 22
However, because of the sought-after amenities, the asking price is higher than the average for the property of the project. In order to use comparable, the adjacent apartments are not taking into consideration due to the differences. A loft and affordable apartment housing as well as a lack of amenities in one of the apartment are not a good example to compare the project. That is why, two competitive buildings exist for The Cedars Complex project but they are a bit far from the neighborhood that are more suitable for comparison: Broad stone Ambrose: It is a new building and has 2 and 1 bedroom apartments which facilitates the comparison between the main project. In addition it has new amenities such as lounge and a gym.
Figure 12: Competitor 1 1900 Elm: It is an older apartment where the price range and the target market is similar to The Cedars Complex so this can be a good comparison to compromise for the location of the project and for the first comparative set which is more luxurious unit.
Figure 13: Competitor 2
6.1 Project Summaries These projects adjacent to Browder street are not similar to the main development due to the differences which entail the property purpose and the low value as well as the sizing.
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Ameni Kabboudi: ak5277@nyu.edu That’s is why to satisfy a better comparison, two different buildings were chosen in order to achieve a better estimation for the amenities that can be play a differentiation when additional modification is taken into consideration such as the amenities and the asking price.
6.2 Reasons for inclusion in competitive set The reason behind the inclusion in the competitive set is the type of property provided as well as the location, 5 miles far from The Cedars Complex, which is more likely to acquire similar rental prices within Cedar neighbourhood and additional figures are analyzed to indicate the competitive setting for the main development. The main reason for the inclusion of this competitive set is to estimate the projection of the development of the site.
7
SWOT Analysis
Since the vision of the development project “The Cedars Complex” must complement its operational environment, a review of the internal (strengths and weaknesses) and external information (opportunities and threats) of the project via a SWOT analysis is conducted to facilitate a revision to its stated vision.
7.1 Strengths
The Cedars Complex is the only apartment in Cedar neighbourhood that provides its members with its own full-set kitchen and modern appliances. Similar residential apartments are located further from the neighbourhood and they cost more to be a tenant. Multi-purpose Clubhouse/function centre with highly sought-after view on the garden.
7.2 Weaknesses
The location might not foster a goof retail environment despite it being one of the few centres and shops around the residential area. Despite its innovative building and provision of different amenities, The Cedars Complex might require significant capital investment in the future with a slightly weak performance at the first years. There should be an activity engagement to avoid low rate of membership engagement in the lounge activities and facilities. The retail existence can be hacked by the low foot-track due to the existence nature of the neighbourhood.
7.3 Opportunities
A growing population with suitable demographics presents high demand for rental units and growth opportunities. The cross-section of the population is very likely to participate in shopping and recreation activities, the likes of which The Cedar Complex offers.
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External partnerships with local real estate agents and businesses that would strategically benefit The Cedars Complex leasing recruitment.
7.4 Threats
Severe, climatic events which may cause significant damage to the Club’s natural environment and ecological capital knowing that Dallas has a moderate risk of hail storms. Amalgamation of competitor residential buildings in the local area and consolidation within The Cedars Complex market is projected in the future. Reduction in rental prices as an incentive for other competitors should be estimated in the first year. However, an increase in rent can be achieved.
At present, The Cedars Complex does not have a singular, specific vision. Instead, the market and the mission has a future impact on the neighbourhood composition. Thus, the development around the area
8
Financial Analysis
4 stories, and retail space will cover 50,000 of the building. The estimated asking price is $15 higher than the actual average price for retail in Dallas.
46 One bedroom / one bathroom 702 Sf -$ 596 87 Two Bedroom / Two bathrooms 950 Sf – $967 31 Three Bedroom/Two bathroom 1055 SF – $1001
8.1 Executive Summary of financials The financial projections for The Cedars Complex are encouraging. The project projects strong financial performance within the three-year period covered in the pro forma financial statements accompanying this plan. Year
Land
2013
465,630 Table 4: Assessment of land
Tax amount will be determined by the Dallas county assessor’s office. The estimated valuation would be 2,428,040. Some of the assumptions made in the preparation of the income statement include that: There will be 164 residential Units; one bedroom is $596 and two bedrooms are $967, three bedrooms cost $1001.
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Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu The operating expenses will reach $990,080, with a reduction of costs by 30% The Cedars Complex Rental Revenue is projected to be $1.347 million in 2015 Operating Expenses will rise sharply from $990,080 in 2015 to almost a million and half in 2021, as that will coincide with the competitors’ projection. As the primary goal of The Cedars Complex is to complete construction of the building and get tenants in quickly, the firm’s breakeven point will be calculated. The firm’s Debt is $16 Million, but then begins to right itself for the remainder of this plan with an annual debt to service of $ 1,091,879. After tax IRR is expected to reach 25.96% in case of sale of the property. Net operating income will reach $ 1,419,443.
8.2 Assumptions Assumption are discussed in details within the excel sheet provided for the financial. Closing costs are 2% of the purchase price. Residential In-place Revenue is based on your project rent roll. Residential Revenue is expected to increase at a 3%. Retail Revenue is expected to increase at 3%. Residential and Retail vacancies are 5% and credit loss is 2%. Operating Expenses are per sq.ft. Operating Expenses are projected to increase 4% per year. The projected holding period for the property is 10 years. The residual cap rate is 7% and sales costs are projected at 3%. Retail will cost 15 per sq > than average sq.ft and only 50,000 of the total gross floor of the building. 8.2.1
Market
In order to establish a good analysis, Dallas market offers in terms of vacancy rates, rental average and the actual cap rates without forgetting the tax rate for the property. Market is expected to grow by 3%. 8.2.2
Operating
For the operating expenses an estimate based on Texas average costs for operation. Expenses for The Cedars Complex are expected to increase at an annual rate of 3.5% except for management expenses. 8.2.3
Physical
A very detailed physical plan is included in the appendices (Appendix 4: Plan). A very coherent architecture as well as a modern and green appliances are implemented in the building to match the area standards.
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8.2.4
Financial
For The Cedars Complex, a mortgage for $16 million is expected (based on roughly 75% LTV). Terms are 25 years with 10 year balloon loan and an annual interest rate of interest rate of 3.79%. the annual debt service, portions due to interest and principal, and the mortgage balance for each year of the holding period is calculated in the excel. Assuming a 7% cap rate to determine value or 1.30x debt service coverage or 75% of purchase price with a base rate of 3.50% plus a spread of 125 basis points.
8.3 Development Costs The development of The Cedars Complex project is based on an estimate cost of construction provided by Texas online estimator. The budget remains an estimate until more details would be provided in the construction scope. About 65% of the total cost of the project represent the estimated budget for the construction loan. The budget overall is estimated to cost $ 9,308,265 including sales tax of the material which is 2% according to Dallas city tax. Details are discussed later in the excel spread sheet. The construction budget is about 65% of the total project cost.
8.4 Projection of Finance As noted above the plan is to make three types of residential units which consist of two, one and a studio with different costs (comparable above in the report) are matched. The projected cash flow and sensitivity analysis is calculated late on the excel with positive net present value and IRR and ROE.
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Recommendations and Conclusions
The Cedars Complex enjoys good location and a concessive future of the neighborhood in Dallas it shall make sure that the project of its residential units is taking place in the best possible manner. Due to moderate competition in the market, The Cedars Complex shall focus on the Quality of units provided and shall also try its best to meet different kind of requirement of different tenants by providing variety of options. Due to the current equilibrium of supply situation in the market, The Cedars Complex shall set incentive for first year for tenants and then increase price of its property and keep it competitive. The Cedars Complex shall help and lure the prospective tenants by providing them with amenities that they need in order to stay within a community. It shall collaborate with Tech and Interior designer. These days, even small gadgets can be a good winning point that differentiate it. The Cedars Complex shall provide the right amount of greenery in its unit, as pollution free environment is a very important factor that people consider while looking for apartment. As mentioned before, a backyard with common lobby will be executed in the physical plan of the project. That is why there is an aim for silver Leed Certificate.
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Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu Cedar Neighborhood is the places where The Cedars Complex shall come up with new project in small retail / shop area as this is a need for the entire neighborhood that has been marked favorably by the market analysis conducted. Advertisement for renting property in Cedar Neighborhood can be “Why drive for 20 minutes to your workplace every day, take a flat in Cedar today.� As proximity to workplace is the major reason for people renting in The Cedars Complex. Location can be a desire of having an own unit which is the most important reason for the people tend to live far from the city. The financial analysis taken and the sensitivity analysis shows that the project is profitable and the investors should invest. As sshown, NPV and IRR has been strong with different estimate within base, pessimistic and optimistic cases.
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10 Reference List "2014 Dallas Property Tax Rates." Dallas Property Taxes. N.p., n.d. Web. 08 May 2015. About CNA." CNA. N.p., n.d. Web. 08 May 2015. "Android." Dallas Smart Travel Guide. N.p., n.d. Web. 08 May 2015. Bhargava, Nikhil. "BROKER-DEALERS AND INVESTMENT ADVISERS: THE ADMINISTRATION'S PLANS FOR THE FUTURE OF REGULATION." Administrative Law Review 61.4 (2009): 907-18. Web. "Cbre Dallas." Cbre Dallas Askives. N.p., n.d. Web. 08 May 2015. "City of Dallas Texas." Welcome to the City of Dallas, Texas. N.p., n.d. Web. 08 May 2015. "City of Dallas - Open Records Request." City of Dallas - Open Records Request. N.p., n.d. Web. 08 May 2015. "Cities in Texas." Walk Score. N.p., n.d. Web. 08 May 2015. "Commercial Real Estate." Commercial Real Estate. N.p., n.d. Web. 08 May 2015. "Dallas Entertainment Districts | Things to Do in Dallas." Dallas Entertainment Districts | Things to Do in Dallas. N.p., n.d. Web. 08 May 2015. “Dallas Housing Report. Rep. N.p.: n.p., n.d. Jones Lang Lasalle. Web.” "Dallas Multifamily Snapshot." - Cushman & Wakefield. N.p., n.d. Web. 08 May 2015. "Dallas Office Snapshot." - Cushman & Wakefield. N.p., n.d. Web. 08 May 2015. "Dallas Market | Commercial Real Estate Dallas Blog." Dallas Market | Commercial Real Estate Dallas Blog. N.p., n.d. Web. 08 May 2015. "Dallas Urban Planning." And Dallas Texas Highlights. N.p., n.d. Web. 08 May 2015. "Esri - GIS Mapping Software, Solutions, Services, Map Apps, and Data." Esri RSS News. N.p., n.d. Web. 08 May 2015.
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Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu "Fast and Easy Project Estimates." Construction Cost Estimator App for IPad, IPhone, and Mac. N.p., n.d. Web. 08 May 2015. "Green Dallas." Green Dallas. N.p., n.d. Web. 08 May 2015. "Home Rentals in Dallas, Texas." Houses & Homes for Rent in Dallas, TX. N.p., n.d. Web. 08 May 2015. "LEED | U.S. Green Building Council." LEED | U.S. Green Building Council. N.p., n.d. Web. 08 May 2015. "Online Resources." City of Dallas GIS Services. N.p., n.d. Web. 08 May 2015. "Texas Retail Snapshot." - Cushman & Wakefield. N.p., n.d. Web. 08 May 2015. "We Have 1704 Apartments for Rent in Dallas, Texas." Apartments for Rent in Dallas, TX. N.p., n.d. Web. 08 May 2015. "Welcome to Dallas Housing Authority." Welcome to Dallas Housing Authority. N.p., n.d. Web. 08 May 2015.
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11 Appendices Appendix 1: Silver Leed
LEED-TX Version 2.2 Registered Project Checklist The Cedars Complex Dallas, Texas Yes
?
No
1
Sustainable Sites
1
Prereq 1
Construction Activity Pollution Prevention
Credit 1
Site Selection
1
Credit 2
Development Density & Community Connectivity
1
Brownfield Redevelopment
1
Alternative Transportation, Public Transportation Access
1
Alternative Transportation, Bicycle Storage & Changing Rooms
1
Alternative Transportation, Low-Emitting and Fuel-Efficient Vehicles
1
Alternative Transportation, Parking Capacity
1
Site Development, Protect of Restore Habitat
1
Site Development, Maximize Open Space
1
Stormwater Design, Quantity Control
1
Stormwater Design, Quality Control
1
Heat Island Effect, Non-Roof
1
1
Credit 3 Credit 4.1 Credit 4.2 Credit 4.3 Credit 4.4 Credit 5.1 Credit 5.2 Credit 6.1 Credit 6.2 Credit 7.1 Credit 7.2
Heat Island Effect, Roof
1
1
Credit 8
Light Pollution Reduction
1
1 1 1
Yes
1
?
Required
No
Water Efficiency Credit 1.1 Credit 1.2
1
14 Points
5 Points
Water Efficient Landscaping, Reduce by 50%
1
Water Efficient Landscaping, No Potable Use or No Irrigation
1
Credit 2
Innovative Wastewater Technologies
1
Credit 3.1
Water Use Reduction, 20% Reduction
1
Credit
Water Use Reduction, 30% Reduction
1
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Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu 3.2 Yes
?
No
Energy & Atmosphere
3
17 Points
1
Prereq 1 Prereq 2 Prereq 3
1
Credit 1
Optimize Energy Performance
Credit 2
On-Site Renewable Energy
Credit 3
Enhanced Commissioning
1
Credit 4
Enhanced Refrigerant Management
1
1
Credit 5
Measurement & Verification
1
1
Credit 6
Green Power
1
1 1
Fundamental Commissioning of the Building Energy Systems
Required
Minimum Energy Performance
Required
Fundamental Refrigerant Management
Required 1 to 10 1 to 3
continued… Yes
?
No
Materials & Resources
2
Prereq 1 Credit 1.1 Credit 1.2 Credit 1.3 Credit 2.1 Credit 2.2 Credit 3.1 Credit 3.2 Credit 4.1 Credit 4.2 Credit 5.1
1
1
1 Yes
6
?
Building Reuse, Maintain 75% of Existing Walls, Floors & Roof
1
Building Reuse, Maintain 100% of Existing Walls, Floors & Roof
1
Building Reuse, Maintain 50% of Interior Non-Structural Elements
1
Construction Waste Management, Divert 50% from Disposal
1
Construction Waste Management, Divert 75% from Disposal
1
Materials Reuse, 5%
1
Materials Reuse,10%
1
Recycled Content, 10% (post-consumer + ½ pre-consumer)
1
Recycled Content, 20% (post-consumer + ½ pre-consumer)
1
Credit 6 Credit 7
Certified Wood
1 1 1 1
No
Indoor Environmental Quality
Y
Prereq 1 Prereq 2
1
Credit 1
Y
Required
Storage & Collection of Recyclables
Regional Materials, 10% Extracted, Processed & Manufactured Regionally Regional Materials, 20% Extracted, Processed & Manufactured Regionally Rapidly Renewable Materials
Credit 5.2
13 Points
15 Points
Minimum IAQ Performance
Required
Environmental Tobacco Smoke (ETS) Control
Required
Outdoor Air Delivery Monitoring
1
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Credit 2 Credit 3.1 Credit 3.2 Credit 4.1 Credit 4.2 Credit 4.3 Credit 4.4
1
Credit 5 Credit 6.1 Credit 6.2 Credit 7.1 Credit 7.2 Credit 8.1 Credit 8.2
1 1 1
1
Yes
?
Construction IAQ Management Plan, During Construction
1
Construction IAQ Management Plan, Before Occupancy
1
Low-Emitting Materials, Adhesives & Sealants
1
Low-Emitting Materials, Paints & Coatings
1
Low-Emitting Materials, Carpet Systems
1
Low-Emitting Materials, Composite Wood & Agrifiber Products
1
Indoor Chemical & Pollutant Source Control
1
Controllability of Systems, Lighting
1
Controllability of Systems, Thermal Comfort
1
Thermal Comfort, Design
1
Thermal Comfort, Verification
1
Daylight & Views, Daylight 75% of Spaces
1
Daylight & Views, Views for 90% of Spaces
1
Innovation & Design Process Credit 1.1 Credit 1.2 Credit 1.3 Credit 1.4 Credit 2
1
1
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1
No
2
Yes
Increased Ventilation
?
5 Points
Innovation in Design: Provide Specific Title
1
Innovation in Design: Provide Specific Title
1
Innovation in Design: Provide Specific Title
1
Innovation in Design: Provide Specific Title
1
LEEDÂŽ Accredited Professional
1
No
Project Totals (pre-certification estimates)
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69 Points
Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu
Appendix 2: Market Profile and Housing Summary
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Dallas: Real Estate Development Project
May 8, 2015
Ameni Kabboudi: ak5277@nyu.edu
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Appendix 4: Plan
The End
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